Correlation Between Information Services and Innodata

Can any of the company-specific risk be diversified away by investing in both Information Services and Innodata at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Information Services and Innodata into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Information Services Group and Innodata, you can compare the effects of market volatilities on Information Services and Innodata and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Information Services with a short position of Innodata. Check out your portfolio center. Please also check ongoing floating volatility patterns of Information Services and Innodata.

Diversification Opportunities for Information Services and Innodata

-0.24

Correlation Coefficient

Information Services  Innodata

Very good diversification

The 3 months correlation between Information and Innodata is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Information Services Group and Innodata in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innodata and Information Services is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Information Services Group are associated (or correlated) with Innodata. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innodata has no effect on the direction of Information Services i.e., Information Services and Innodata go up and down completely randomly.

Pair Corralation between Information Services and Innodata

Considering the 90-day investment horizon Information Services Group is expected to generate 0.34 times more return on investment than Innodata. However, Information Services Group is 2.96 times less risky than Innodata. It trades about 0.14 of its potential returns per unit of risk. Innodata is currently generating about 0.01 per unit of risk. If you would invest  330.00  in Information Services Group on December 30, 2024 and sell it today you would earn a total of  70.00  from holding Information Services Group or generate 21.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Information Services Group  vs.  Innodata

Information Services

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Information Services Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, Information Services demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Innodata

Risk-Adjusted Performance

Very Weak

Over the last 90 days Innodata has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Innodata is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Information Services and Innodata

The main advantage of trading using opposite Information Services and Innodata positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Information Services position performs unexpectedly, Innodata can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Innodata will offset losses from the drop in Innodata's long position.

The idea behind Information Services Group and Innodata pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Insider Screener module to find insiders across different sectors to evaluate their impact on performance.